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The much-anticipated judgment in the Court of Appeal case of Churchill v Merthr Tydfil County Borough Council [2023] EWCA Civ 1416 has now been handed down.

The case concerns a claimant that alleges the Council allowed Japanese knotweed to spread from its land onto the claimant’s private property.

The Council argued that the claimant should have considered alternative dispute resolution (ADR) options before pursuing legal action, and therefore made an application for a stay of the proceedings to allow time for ADR. This was not granted by the court.

In this case, the ADR that the Council refers to is its own internal complaints procedure, rather than a more formal process such as mediation.

Legal position

Before the present case, the relevant decision was that in Halsey v Milton Keynes General NHS Trust [2004] EWCA Civ 576, which was an appeal against a costs order made against an unsuccessful claimant, where the defendant had refused invitations to mediate the claim.

Making such an order would have been an exception to the general rule that costs should follow the event – meaning that the successful party should recover its costs.

Halsey suggested that parties could not be compelled to mediate, as it would breach their right to a fair trial, under Article 6 of the European Convention on Human Rights.

The key statement, made by Dyson LJ in Halsey, was that “to oblige truly unwilling parties to mediation would be to impose an unacceptable obstruction on their right of access to the court”.

Many of the intervening parties in the Churchill case sought to have Halsey set aside, as a “thorn in the side of mediation”, given that this type of ADR does not force parties to settle or abandon claims as they have to voluntarily agree to mediate; any settlement is a product of the parties’ agreement.

At first instance in the Churchill case, the judge decided that he was bound by the decision in Halsey, and so was unable to grant a stay of the proceedings to allow time for the parties to engage in ADR via the Council’s complaints procedure.

Court of Appeal’s view

The Court of Appeal (COA) disagreed, although it did not overturn Halsey in full.

1. Was Halsey binding?

Instead, the COA found the passages that the first instance judge referred to were not part of the essential reasoning in Halsey, but merely obiter – meaning that the judge was not bound by them.

The COA drew four indications from the judgment in Halsey, meaning that the statement could be considered obiter: the decision was about costs sanctions, not the decision to mediate; the section of the judgment was about “general encouragement of the use of ADR”; there had been no discussion before oral submissions at trial about compulsory mediation; and the judge was simply seeking to provide general guidance on dealing with costs issues.

This meant that the decision at first instance to refuse the stay had been made incorrectly.

2. Can the court stay proceedings for the parties to pursue ADR?

The COA was referred to various provisions that pointed to the court encouraging parties to consider ADR and proceedings being ‘the last resort’.

The COA also considered various authorities and concluded that the court can order a stay for ADR, provided the order did not impair the claimant’s right to go to trial and was proportionate to achieving the legitimate aim of settling the dispute fairly, quickly and at reasonable cost.

Article 6 rights, therefore, remain important and will overrule the imposition of any form of ADR which, in the court’s exercise of its discretion, is considered disproportionately onerous.

3. What are the consequences?

Because the courts are not bound by the obiter comments in Halsey, judges can lawfully stay proceedings for, or even order, the parties to engage in ADR such as mediation.

Indeed, it is clear from the court rules that the court is required to further the overriding objective; including by encouraging the parties to use ADR where appropriate.

The court would not, however, be drawn on what would be relevant factors in deciding whether proceedings should be stayed, or whether such an order should be made. Instead, this remains a matter for the trial judge on a case-by-case basis – no checklist or score sheet has been provided.

In fact, in Churchill, while the COA considered that the first instance judge would have stayed the case had he felt able to do so, there was now little point in doing so given the parties’ positions had become so entrenched.

While there is a move towards compulsory mediation in the court process, mainly for smaller and lower value claims, there remains a concern that mediated settlements do not offer ‘true’ justice, nor is it without its costs.

However, the COA in Churchill expressly state that its experience has shown that “it is extremely beneficial for the parties to disputes to be able to settle their differences cheaply and quickly”.

Commenting on the case, Paul Knight, real estate litigation partner at Shoosmiths and qualified mediator, said:

“This decision gives welcome guidance on the circumstances where the court might grant a stay for or order the parties to pursue ADR. The judgement refers to the significant benefits which parties may secure in engaging in mediation. These include potentially saving time and legal costs. The parties are encouraged by the pre-action protocols to exchange information prior to the issue of proceedings.

“The early exchange of information can make the chances of settling at mediation more likely. Mediation is a voluntary process and any settlement is entirely dependent on parties agreeing terms to bring their dispute to a close. If they do not settle, they are free to seek a decision from the court.”

 

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